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Separate employee shareholder votes urged

Extracted from newspad.

The Centre is to examine the proposal that all quoted companies should record separately employee votes in order to improve board understanding of their concerns. This was decided by member participants in a lively online members’ webclave, hosted by the Esop Centre, to study a paper entitled ‘Employee Voice,’ authored by Damian Carnell and Jane Allen of CORPGRO. The online poll during the webclave came down two-thirds in favour registering a distinct employee voice, although more than a quarter said they did not support it.

The discussions were led by Damian, founder/director of CORPGRO; Anna Watch, head of executive share plans and senior manager, corporate governance, at BT and Jennifer Rudman, industry director, employee share plans, EQ. Damian’s paper proposed that companies should compare the separate vote results of employees and non-employees and analyse the rationale for any marked differences. Good practice would be to present the findings at board level and feed back the main conclusions to the employees with an addendum highlighting the implications of employee voting patterns for the company. Damian said: “A forgotten benefit of Esops is the vote. The problem is that the Esop vote in the register is a very small percentage, so employee shareholders do not have much say. Could we not listen to the employee vote as a separate category and feed the outcome back to the board to compare with votes over time and with institutional investor votes? This could be a source of participation and information for the company. There is a proviso – share options do not have a vote; so we would need some sort of synthetic vote to allow all Esop participants to have their voice heard.”

Participants, who split into working groups, analysed the complexities of organising separate employee shareholder votes, such as the eligibility of employee shares held in ISAs, shares held in nominee accounts, the fact that Esop shares held in trust generally did not vote; whether share options could qualify too and whether the concept should be enforced by regulation.

All agreed that the current level of employee shareholder participation in agm votes was far too low (often below ten percent) and had to be improved. Some companies even refused to allow their employees to vote their shares at agms, while some nominee account holders did not inform employee shareholders when agms were coming up and what the agenda resolutions were. Furthermore, those agm agendas which confined themselves to re-electing directors and approving the board’s remuneration report and/or the remuneration policy report were unlikely, in themselves, to attract much employee shareholder enthusiasm or interest, according to one participant. However, newspad editor Fred Hackworth said that in the US, engaged employee shareholders at major companies such as Amazon and Alphabet (owner of Google) were tabling agm resolutions demanding that directors draw up detailed plans to counter climate change. Others, like Senator Bernie Sanders at Walmart, were pushing for the appointment of employee directors to the main board of directors. So, the question was whether separate votes for employee shareholders would encourage this US trend towards wider business-societal agm agendas to migrate to the UK?

If detailed monitoring of employee shareholder agm votes in smaller quoted companies were judged too expensive, an alternative might be to canvass employee views well before such meetings. In general, younger employees were often keen to vote, as they were more interested in what their employer was doing, particularly in the ESG field. The pandemic had made it easier for employees to ‘attend’ virtual agms and technological advances had cut the cost of crystallising who had voted for what.

Overall, the traditional view was that the ability to compete depended upon optimising shareholder return and that the employee voice had no valid role in governance, but the counter view was that competitiveness depended on the capacity of firms to mobilise employee skills as a key source of innovation and learning. The webclave was chaired by Prof Michael Mainelli, chairman of the Z/Yen Group, which operates the Esop Centre.

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